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Tax Cuts Lead to Robust Consumer Spending for PEI, Says BMO Economics

Although consumer spending will slow in 2008, it will continue to be one of the bright spots for PEI, helping to offset sluggish manufacturing activity, according to a provincial economics outlook released today by BMO Financial Group.

“Housing starts are tracking below levels from a year ago, but consumer activity is robust helped by personal income tax cuts,” said Doug Porter, Deputy Chief Economist, BMO Capital Markets. Mr. Porter added that a strong loonie should put a damper on tourism as Canadians increasingly head south of the border.

Highlights of the report include:

  • GDP growth should slow to 1.5 per cent this year and then rise to 1.9 per cent in 2009.
  • Housing starts are expected to total 1,200 over the next two years.
  • Unemployment rate expected to increase slightly to 10.4 per cent in 2008 and 10.7 per cent in 2009.
  • Reflecting an increase in capital investment and borrowing on behalf of Crown corporations, total borrowing requirements are forecast to be $171 million.

The complete report can be found at www.bmocm.com/economics.

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